Japan may only refund taxes after tourists have left the country.

Nikkei Asia reported on November 25 that the Japanese government is considering refunding purchase taxes to tourists after they leave the country, in order to prevent tax evasion.

According to the new regulations, tourists will have to pay consumption tax at the time of purchase and will be refunded after leaving Japan. This is also a typical practice in other countries, including Vietnam.

The aforementioned changes will take effect in fiscal year 2025 or later, as department stores and other retailers in Japan need time to prepare.

Japanese law provides for consumption tax exemptions for foreign visitors staying for less than six months, and this only applies to items permitted to be taken out of the country. Therefore, businesses must verify and clearly explain the tax exemption conditions to customers and maintain records.

Currently, Japan deducts consumption tax directly for tourists when they purchase goods at duty-free locations or special sales counters. Some people have found ways to circumvent the law, selling products at taxed prices to make a profit.

In December 2022, Apple's headquarters in Japan was investigated by the country's tax authorities and ordered to pay an additional $87 million (at current exchange rates) in unpaid consumption tax for two years, starting from September 2021.

A survey conducted by Japan's National Tax Service from July 2021 to June 2022 found 24,000 cases of companies failing to declare consumption tax, with a total amount of 86.9 billion yen (nearly $600 million) to be collected.

There are currently around 53,000 duty-free shops in Japan, a tenfold increase compared to 2013. Demand from tourists visiting the country is gradually recovering after the COVID-19 pandemic, due to the weakening yen and eased border restrictions.

The Japanese government is discussing and will release details in a draft tax reform plan to be published in December.

Phuong Mai is a reporter for Travellive Magazine in Hanoi.

Phuong Mai